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Three Tips To Manage the Perils of CX-based Compensation Systems

Medallia: Customer Feedback

Most companies recognize both the importance of great customer service and the importance of rewarding employees for great performance. In fact, according to a 2017 Accenture-Medallia survey of 450 global senior customer experience and marketing executives, 43 percent of companies base some portion of frontline pay on customer feedback ratings. Unfortunately, compensation systems can make it tricky to tie frontline incentives to an employee’s customer satisfaction ratings, especially when the systems aren’t designed well, leading to employee behavior that runs counter to the goal of improving customer service.
Most often we’ve seen that the problems are related to employee perceptions of accuracy and fairness. One reason employees may have a negative option of a CX-based comp system is because customers get upset about things that they have little control over or that have nothing to do with employee performance. For example, when a customer gets upset that a package didn’t arrive, he may give a low rating to the customer service agent, even though it had nothing to do with that person, and the agent still gets the low rating.
Using a system of CX-based compensation without recognizing potential risks often leads to unsatisfied customers, as well as unmotivated and unengaged employees. Fortunately, there are things that you can do to minimize these risks. Here are three tips for increasing the accuracy of CX ratings and the fairness of the overall system:

Tip 1: Increase the volume and quality of customer feedback provided to each employee

When a sufficient number of customers rate a given employee’s performance, there’s a higher probability that the overall rating reflects the quality of her actual performance.

Tip 2: Set targets that are fair and achievable

Performance targets should be both measurable and attainable. Even a very precise score can be a hindrance if it can’t be measured accurately or reflects an unrealistic target.

Tip 3: Make sure other systems and processes align with the goals you set

If you want employees to deliver great experiences, you need to give them the tools and discretion to do it well, such as proper training, information systems, workflows, and feedback. When systems align around a company’s customer-centric goals, your employees will feel more empowered in their efforts to deliver exceptional customer service.  
Though many ratings-based comp systems are flawed, there are ways to minimize some of their unintended consequences. The risks can be mitigated by creating reliable metrics, achievable goals, and an organization that is fully-centered around the customer. Once all of these are in place, ratings-based incentive systems tend to be more accurate and fair, and ultimately benefit both customers and employees.
To learn more, read our white paper, Money and Motivation: Avoiding the Perils of CX-based Compensation.